Ruminations of an Israeli-American Venture Capitalist Looking for the Best and Brightest Entrepreneurs

Friday, February 27, 2015

TLV SFO DELAYED

By default Google Maps still shows us the way to get from Tel Aviv to Istanbul is to drive through neighboring Syria and Iraq. Algorithms are ignorant of the grim geopolitical reality that restricts our travel options from Israel. But the peculiar case of the permanently delayed flight from TLV to SFO is neither the result of a computer glitch nor an aeronautical limitation, but an invisible man-made barrier erected by neglect and maintained by ignorance. It undermines Israeli high tech and is a national embarrassment for a country that is the clear number two to Silicon Valley in high tech innovation.

We Israelis seem to have accepted the current situation as yet another imposition we can live with. After all, a simple query on Kayak demonstrates that there are many other ways of flying to SFO via NY, London, Frankfurt, Paris, Dublin, Amsterdam, Toronto, Dubai etc. But this just proves the point that TLV’s situation is an outrageous anomaly for an otherwise very connected country. Other major cities wait patiently for their own high tech economies to take off, while their national airlines are already prepared with daily flights in and out of SFO.

Not so in Israel, where our strong ties to the Valley thrive despite the lack of direct flight options. Migrant Israeli travelers we are forced to choose between connection anxiety and layovers long enough to gain permanent residency; between sleepless “redeyes” and abandoning meetings midway to catch the only flight back in time to catch the connection to TLV. As a result, many Israelis spend as much time traveling as they do visiting their Silicon Valley destination, making relocation a common remedy.

But this still just sounds like a minor inconvenience for the privileged few and therefore yet another grievance from an ungrateful citizen of a country with many other economic priorities. While there are more pressing issues, not so in the high tech sector of which the country is so proud. The TLV to SFO delay hurts Israeli high tech in more ways than we think.

If we want Silicon Valley to come to Israel, we should pave the path. Israel literally pays foreigner multinationals and investors to set up shop in Israel through tax incentives and grants, and for good reason as foreign direct investment is a boon to the economy. But we underestimate the shock Silicon Valley executives get when their secretaries inform them they will have to fly via Heathrow or Newark, and that they can’t use Emirates. They are impressed when it dawns on them that those Israelis have been doing the same trek month after month for years, but then reality sets in. Why would a Silicon Valley CEO want to establish an Israeli subsidiary when there are no direct flights? Which of their execs can free up the time to fly out there regularly? They have to want it really badly, which puts Israel high tech at a permanent disadvantage when other options are available.

Conversely, the indirect flight paths have a direct affect the willingness of Israelis entrepreneurs to move to the Valley versus the East Coast. Israeli startups do themselves a disserve not starting their US office in the Valley as it keeps them away from the center of high tech activity with all its repercussions. While some Israeli entrepreneurs choose NY or Boston over the Valley because of a sector specialty, the extra travel distance is the determining factor for everyone else still choosing the frigid East Coast over sunny Silicon Valley. Entrepreneurs simply can’t stomach the idea of flying back and forth between their Israeli and Silicon Valley offices. Ironically, successful Israeli companies headquartered in NY and Boston have had a major part in keeping those regions still relevant in an age when everything else in high tech has consolidated in the Valley. And to avoid any confusion, while NY is still the finance capital of the world, most tech analysts and bankers covering everything from Internet to semiconductors moved to Silicon Valley over a decade ago.

If there was ever a capitalist justification for government intervention in the private market, the establishment of a line linking Israel to the center of the high tech world would be it. Although it probably wouldn’t need to, the government could even subsidize a TLV SFO line to get it off the ground. I know it’s complicated with airport landing rights, game theory between competing carriers and keeping all lines profitable, but the government props up countless unviable high tech companies via the Chief Scientist. And surely we can find more than a few precedents for the Ministry of Transportation subsidizing strategically important, yet unprofitable roads, tunnels and bridges. TLV SFO is a national economic priority with a fairly immediate ROI. ->

As I write this missive conveniently during my layover in Heathrow Terminal 5, I am reminded of the fact that overwhelming economic considerations eventually helped China overcome the politically unthinkable and establish a direct flight linking Shanghai and Taipei despite the lack of formal diplomatic ties. The economics are on our side and the politics are non-existent, so it may just be a matter of time. But I hope it happens soon because eventually one of those European capital cities with direct flights to SFO will realize the advantage they offer Silicon Valley companies and steal the attention.

Coincidentally, my colleague, Amit Karp, published a great post on the importance of being local, which you can read here. Also, please sign the Petition if you haven't already. http://sfotlv.org/

Bessemer Blogs

StatCounter

Update Your Followers About My Blog

The thoughts and opinions expressed herein belong to the author and do not necessarily reflect those of Bessemer Venture Partners or any of its affiliates (“Bessemer”). The material here is written on the author’s own time for [his/her] own reasons and Bessemer has not reviewed or approved the information herein. Any discussion of topics related to Bessemer or its investment activities should not be construed as an official comment of Bessemer.